Aug. 29, 2013
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Drivers filling up at a Mobil station in Needham, Mass. / Steven Senne, AP

by Gary Strauss , USA TODAY

by Gary Strauss , USA TODAY

That September drop you were expecting for gasoline prices? Don't hold your breath.

Currently, gasoline averages $3.56 a gallon nationally, down from $3.62 a month ago.

Most analysts had expected a drop to about $3.40 by early fall on seasonal demand slumping following the summer driving season.

Not now. Some forecasters predict a short-term spike of up to 10 cents a gallon. Crude oil prices and gas futures are soaring on growing fears that if the U.S. military strikes at Syria for its handling of civil unrest, Middle East oil supplies could be disrupted.

After climbing to a two-year high above $112 a barrel in early trading Wednesday, domestic crude oil for October delivery settled below $108 Thursday. Brent crude oil, up 1.5% in London Wednesday near a six-month high of $116, closed Thursday at $114.34.

U.S. wholesale gas prices - measured by September futures contract trading -- also eased after climbing five of the past six trading sessions. Thursday's close: $304.27 a gallon, a 1.5% drop from Wednesday.

Retail gasoline prices are typically 60 to 75 cents higher.

Despite Thursday's breather, the recent gains in both crude and wholesale gas prices already are being felt at the pump.

"In some portion of the country, those increases are translating into a few bumps higher, and in other areas, the slow drift to lower (pump prices) has been put in limbo,'' says Tom Kloza, chief oil analyst for price tracker gasbuddy.com.

"Bottom line, we'll be paying perhaps in the low $3.60s this weekend, and God willing, the last 120 days of the year should see prices at or below those levels, once crude calms down and sellers return to the global crude market,'' Kloza says.

Syria isn't a major oil producer - its output is less than 100,000 barrels a day vs. about 400,000 before its civil war started two years ago. But oil prices have been rising since July, when political upheaval Egypt sparked concerns about access to supply routes through the Suez Canal.

The region was already under pressure before Syria's uncertainty caused crude to spike. Civil unrest in Iraq is rising again - more than 1,000 Iraqis were killed in July, the highest monthly death toll since 2008.

Libya's oil production is already down sharply due to worker strikes over pay. Libya's deputy oil minister says protests by security guards have slashed oil exports to just 300,000 barrels a day vs. 1.6 million barrels prior to the 2011 war that toppled dictator Moammar Gadhafi.

Some industry observers, such as Societe Generale SA oil analyst Michael Wittner, suggest rising tensions could cause Brent crude to spike to $150 a barrel if the Syrian conflict spills over to major producers, causing larger supply disruptions. Prices last approached that level in July 2008, when Brent hit an all-time high of $145.60.

Still, Wittner says any spike would be short-lived because rising prices would inevitably lead to a demand slowdown that would drive prices lower. And some major producers, namely Saudi Arabia, are willing to pump more oil as needed during a supply disruption to help keep price increases under control and contain any damage to the global economy.

Kloza doesn't see $150 a barrel oil, given weakening U.S. demand and falling prices of ethanol, which makes up 10% of most domestic motor fuels.

"Under most scenarios - but perhaps not the scenarios proffered by banks or hedge funds with plenty to gain from oil price escalation -- I believe $115-$120 a barrel is probably a ceiling for this crude oil rally,'' Kloza says.